China Merchants Bank (CMB) remains a leading performer, yet it faces a challenging environment. With the 2025 annual report season for banks drawing to a close, a comparative analysis reveals that CMB's 2025 financial results are not subpar. In terms of growth quality, it might even rank among the best of the major banks: net interest income turned positive, the decline in net interest margin was relatively contained, and asset quality remained stable. When compared horizontally with other joint-stock and large state-owned banks, its performance is competitive. However, the core issue lies precisely in the fact that the more CMB strives to maintain its "top student" status, the more fragile its growth model appears.
Large state-owned banks can mitigate pressure from narrowing interest margins through scale expansion, investment income, and policy-related attributes; CMB does not have this luxury. The higher return on equity (ROE), superior valuation, and stronger moat narrative that CMB has achieved in recent years are fundamentally built on two pillars: a higher net interest margin and a stronger retail advantage. Once these core competencies are compressed, the impact on CMB extends beyond a mere slowdown in profit growth to a potential market repricing of its entire business model. Therefore, the critical question in a low interest margin era is whether CMB's excellence can be sustained. This is the true lens through which to understand CMB's current financial reports, valuation, and future strategic space.
Why does CMB remain a top performer? If one only looks at revenue and net profit growth rates, CMB's 2025 results are not particularly outstanding. As the earnings season for listed banks concludes, the overall picture remains largely unchanged: high-quality city commercial banks in developed regions performed relatively stronger, while nationally-oriented large state-owned banks and joint-stock banks generally faced pressure. Among the top ten banks in China, including the "Big Six" state-owned banks and four leading joint-stock banks, the median revenue growth rate was only 1.9%, and the median net profit growth rate was just 1.7%. In such an environment, analyzing growth rates in isolation holds diminishing significance.
What is more worthy of examination is the quality of growth. Assessing a bank's growth quality essentially involves scrutinizing three key areas: the interest margin account, the risk account, and the non-interest income account. Revenue growth is typically more important than net profit growth because profits can be artificially "squeezed out" through provisions and expense adjustments, whereas revenue is harder to manipulate. Within revenue, it's crucial to see if net interest income has stabilized and if non-interest income is sustainable. Delving deeper, one must also assess whether asset quality has been compromised to chase growth.
Judged by these criteria, CMB's 2025 performance demonstrates more substance than superficial growth rates suggest. Within the cohort of joint-stock banks where CMB resides: First, examining the interest margin account: In 2025, CMB's net interest income grew by 2.04% year-on-year, significantly better than Industrial Bank's (CIB) 0.44% growth and stronger than China CITIC Bank's (CITIC) decline of -1.51%. Among leading banks, few achieved positive growth in net interest income; within the top ten, only Bank of Communications (BoCom), CMB, CIB, and Shanghai Pudong Development Bank (SPDB) managed this. However, BoCom and SPDB inherently operate with lower interest margin levels and thus had less room for decline; their logic for achieving positive net interest income differs from CMB's. CMB achieved positive growth by controlling the decline from a relatively higher interest margin base, which carries greater significance. This outcome is supported by both its loan portfolio structure and liability management capabilities. In 2025, CMB's corporate loans grew by 12.29%, while its retail loans also increased by approximately RMB 75 billion, or about 2%. In contrast, CITIC and CIB made limited progress in retail loans, relying more on corporate loan expansion to support scale. In other words, CMB's advantage lies not in one segment being exceptionally strong, but in neither its corporate nor retail businesses falling significantly behind.
Looking further, the evolution of the corporate business is particularly noteworthy. The market has long perceived CMB as a "retail bank," but in recent years, its accumulation in corporate banking has actually accelerated. By the end of 2025, the corporate loan balances of CIB, CITIC, and CMB were RMB 3.74 trillion, RMB 3.29 trillion, and RMB 3.22 trillion, respectively. CMB is gradually closing in on the two traditionally more corporate-focused joint-stock banks. More critically, CMB's corporate credit structure is relatively less reliant on local government financing-related business. Loans to sectors like local government financing vehicles (LGFVs), infrastructure, and utilities account for about 22% of CMB's total corporate loans, compared to 30% for CITIC and 28% for CIB. What does this imply? The benefits of local government-related business are clear: it helps stabilize interest margins, non-performing loan (NPL) ratios, and deposits in the short term, is easier to scale up, and makes financial statements look better. The problem is that such assets are more dependent on fiscal support and refinancing long-term, generate weak cash flows, are not absolutely safe during debt resolution cycles, and are less conducive to improving yields. In contrast, CMB focuses more on sectors like manufacturing and transportation. While more challenging, this approach is more beneficial for maintaining asset yields and loan portfolio quality over the long term.
Next, examining the risk account: In 2025, CMB's NPL ratio decreased from 0.95% to 0.94%, and its NPL formation rate dropped from 1.05% to 1.03%, indicating an overall improvement in asset quality. Although CITIC Bank's NPL ratio decreased from 1.16% to 1.15%, its NPL formation rate increased from 1.11% to 1.15%, suggesting that pressure from new risks has not truly eased. CIB's NPL ratio rose from 1.07% to 1.08%. While it did not disclose its NPL formation rate, data estimates place it around 1.17% for 2025, up from 1.06% in 2024. What banks fear most is not slow growth, but compromising risk management for the sake of growth. The most valuable aspect of CMB's 2025 performance is not how fast it expanded its scale, but that it did not sacrifice asset quality to embellish its reports.
Finally, considering the non-interest income account: In 2025, for fee and commission income, CITIC and CIB reported growth rates of 5.37% and 7.45%, respectively, seemingly higher than CMB's 4.39%. However, in terms of absolute size, CMB's fee income reached RMB 75.2 billion, while CITIC and CIB only achieved RMB 32.8 billion and RMB 25.9 billion, respectively—less than half of CMB's figure. This means that while CMB's non-interest income growth may not be the fastest, its moat in retail fee-based income remains significantly deeper, particularly in businesses like credit cards, wealth management, and custody, where its competitiveness still surpasses most peers.
Considering these three accounts together, the conclusion is straightforward: China Merchants Bank was not the fastest-growing joint-stock bank in 2025, but it was likely the one with the highest quality of growth. This quality advantage extends not only over CITIC and CIB but also over the large state-owned banks.
While CMB's asset growth lagged behind the large state-owned banks, among the "Big Six," only BoCom saw a slight increase in net interest income, as the state-owned banks experienced more substantial declines in net interest margins, mostly over 14 basis points (bps). Faced with falling net interest income and a relatively low proportion of fee and commission income, the revenue growth of large state-owned banks was largely driven by investment income or fair value changes, lacking stability and sustainability. For example, China Construction Bank (CCB), despite a 2.9% decline in net interest income (the highest drop among the Big Six), managed 1.88% revenue growth primarily due to a significant 129% increase in gains from the disposal of bond and equity investments. Regarding asset quality, the NPL ratios of large state-owned banks generally decreased but remained higher compared to CMB. Looking across the top ten banks, only BoCom, CMB, CIB, and SPDB achieved positive growth in net interest income. Among these, BoCom and SPDB are the bottom performers in terms of interest margins within their respective groups (state-owned and joint-stock), meaning they had less room for margin compression, leading to positive growth. Only CMB and CIB achieved positive growth by controlling the decline of their relatively higher net interest margins. Comparatively, CMB's growth was more pronounced than CIB's.
Why is CMB more vulnerable to interest margin compression than the large state-owned banks? The problem lies precisely here. For most banks, narrowing interest margins represent a profit pressure; for CMB, it is not just a profit issue but a business model issue. CMB's status as a "core asset" among bank stocks in past years was not built solely on size or policy dividends, but on the market's belief in its ability to consistently achieve two things: maintain lower liability costs than peers and ensure more stable returns on the asset side. The former stems from its strong retail customer base and wealth management capabilities, the latter from its pricing power in retail credit and high-quality assets.
To be more direct, large state-owned banks and CMB operate on fundamentally different growth models. The profit logic of large state-owned banks aligns more with "low interest margins, massive scale, strong stability, and strong policy attributes." They act as national financial infrastructure, with a primary mission to serve the real economy, provide favorable financing terms, and stabilize growth and employment. Regulatory requirements for these banks are not focused on achieving high interest margins but on lowering financing costs. Therefore, interest margins are not the core variable for their valuation or moat. Their asset-liability structure is inherently more conservative, focused on government bonds, local government bonds, loans to central state-owned enterprises (SOEs), mortgages, and high-quality corporate loans. They naturally have lower exposure to high-yield SME loans, high-risk retail loans, and high-pricing credit loans, resulting in inherently lower asset yields. The market's pricing logic for them revolves more around high dividends, stability, and perpetual operation.
CMB is different. The higher ROE and premium valuation CMB has commanded in recent years are based on the market's perception of its "sustained excellence," not merely its "stability." It resembles a growth stock within the banking sector, with a valuation logic built on net interest margin, retail advantage, and ability to generate excess returns. Precisely because of this, the importance of net interest margin to CMB far exceeds that for most banks. A 10 bps decline in interest margin might merely make the profit statement of an ordinary bank look worse; for CMB, it triggers market questions: Is the retail advantage still intact? Is customer value being preserved? Is the moat eroding? This explains why, during the interest margin downturn of 2024, CMB's revenue declined while most other top-ten banks maintained growth, and why market sentiment reacted more strongly to CMB's revenue pressure. Ordinary banks were transitioning from ordinary to more ordinary; CMB was transitioning from excellent to less excellent. The former affects profits; the latter affects valuation.
A more troublesome aspect is that CMB is already highly optimized on the liability side, leaving limited room for further improvement. CMB's proportion of current account deposits has long been high, and its liability costs are among the lowest in the industry. This is undoubtedly its core advantage and the most successful manifestation of the retail bank model. However, the problem is that other banks can still improve their cost side by reducing high-cost liabilities and adjusting deposit structures. CMB, already operating at a low level, has limited room for further reduction. For CMB, low liability costs represent both a moat and a ceiling.
The challenges on the asset side are even more apparent. If large state-owned banks and most joint-stock banks can stabilize scale and revenue by aggressively expanding corporate loans when retail lending is under pressure, CMB cannot simply replicate this path. The reason is simple: corporate loan expansion, while boosting scale, dilutes interest margins. In 2025, the yield on CMB's corporate loans was only 2.81%, significantly lower than CITIC's 3.54% and CIB's 3.49%. CMB's ability to compete for market share with lower rates is essentially due to its strong retail franchise and abundant low-cost deposits, which allow it to tolerate lower loan pricing. But this also means that the more it expands its corporate business, the more its overall asset yield is susceptible to dilution.
Consequently, CMB is caught in a high-difficulty balancing act: expanding corporate lending risks making its profile "flatter" (lower yielding); focusing on retail lending is better for maintaining yields, but retail lending no longer offers the same combination of high returns and low risk as in the past. This dynamic is already evident in the 2025 data. Over the past year, while most large state-owned and joint-stock banks were scaling back retail lending, CMB continued to expand its retail credit portfolio. Specifically, high-yield consumer loans and business loans grew by RMB 30 billion and RMB 50 billion, respectively, while low-yield mortgages grew by less than RMB 8 billion. The logic behind this move is understandable: in an environment of interest margin pressure, CMB must defend its asset-side yield as much as possible. However, the problem is that the difficult situation in retail has not fundamentally eased. In 2025, the yield on CMB's corporate loans fell by 59 bps, slightly less than the 64 bps decline in retail loan yields, but the key point is that yields on both sides are under pressure. Regarding asset quality, while consumer loans remained generally stable, the NPL ratio for business loans increased from 0.79% to 1.22%, a significant rise. This indicates that high-yield assets come at a cost, especially in the current economic environment where balancing returns and risks in the retail segment is more challenging than before.
Therefore, CMB's true difficulty lies not in whether its "performance is poor," but in "what path to choose next." Further strengthening the corporate business would improve scale metrics but further dilute interest margins. Doubling down on retail lending, while more aligned with CMB's traditional strengths, means confronting the realities of weak demand, intensified competition, and rising risks. The previous "top student" model of "high interest margin + strong retail + high ROE" has not become obsolete, but it clearly operates with much greater difficulty now.
CMB's growth model has entered a high-difficulty phase. Thus, the true message conveyed by China Merchants Bank's 2025 financial report is not that it has returned to a high-growth trajectory, but that it remains one of the industry's most capable top performers, even as the challenge of maintaining that high standard increases. In the short term, CMB's fundamental strengths remain solid. Whether in net interest income, net interest margin control, asset quality, or its fee-based income moat, it remains one of the most resilient assets among joint-stock banks. The market has no reason to treat CMB as an ordinary joint-stock bank, and the gap between it and most peers has not been erased by the industry headwinds of the past two years.
However, from a medium-term perspective, CMB's high-ROE model has entered a high-difficulty phase. The overarching trend of declining interest margins is unlikely to reverse soon, room for further reducing liability costs is limited, corporate expansion dilutes yields, and recovery in retail lending faces constraints from both demand and risk. In other words, CMB's problem is not a loss of competitiveness, but the fact that the previous smooth chain of "high interest margin -> high ROE -> high valuation" is becoming less fluid. This is why the solid 2025 report is difficult to extrapolate linearly into the future. It proves that CMB can still defend its advantages but has not yet fully demonstrated that these advantages can be stably replicated in a low interest margin era.
Looking further ahead, the market will increasingly focus on management succession and future strategy. The primary contribution of the current President, Wang Liang, in recent years has been to steward CMB and preserve its core strengths during a period of dramatic industry change. Some may view his approach as insufficiently pioneering, but in the banking environment of the past few years, radical innovation and rapid growth were not realistic options. Stabilizing CMB's foundation amidst interest margin compression, retail pressure, and industry revaluation is an achievement in itself. Now, as Wang Liang is over sixty and retirement expectations rise, with his successor yet to be named, the market's core concern has shifted: Can the next leader build upon this foundation of "preservation" and articulate a new growth narrative? Will the future CMB continue to strengthen its corporate business for scale, or will it rediscover new growth drivers in retail? In an industry where the rules have changed, can it continue to prove itself as the "exception"?
This is what CMB currently lacks most: not performance, not financial statements, but certainty. Ultimately, CMB's current fragility stems not from a lack of excellence, but from its past exceptional performance. Most banks only need to prove they won't get worse; CMB must continuously prove why it can remain better than the rest. This is the essence of the "top student dilemma." Therefore, the most significant aspect of China Merchants Bank's 2025 financial report is not that it maintained growth quality, but that it once again poses a critical question to the market: In a low interest margin era, can CMB continue to be the bank that is different?